Analysis: US commercial crude inventories plunge as imports hit 8-week lows

New York — US crude oil inventories moved sharply lower in the week ended July 10 amid plunging imports and steady refinery demand, Energy Information Administration data showed July 15.

Commercial crude stockpiles plunged 7.49 million barrels to 531.69 million barrels during the week ended July 10, EIA data showed, narrowing the surplus to the five-year average to 16.6%.

NYMEX August WTI settled up 91 cents at $41.20/b and ICE September Brent climbed 89 cents higher to settle at $43.79/b.

An additional 130,000 barrels flowed into storage at the Strategic Petroleum Reserve. It was the smallest increase since late April, when the US Energy Department began leasing SPR space to producers in an attempt to alleviate an acute storage shortage that sent WTI futures negative.

The bulk of the US crude draw was centered on the US Gulf Coast, where stocks fell 7.9 million barrels to 301.12 million barrels. US West Coast stockpiles were down 1.46 million barrels on the week at 54.75 million barrels.

In contrast, inventories at the NYMEX delivery point of Cushing, Oklahoma, saw a second successive build, climbing 950,000 barrels to 137.17 million barrels, and US Atlantic Coast stocks were up 1 million barrels on the week at 13.06 million barrels, a nine-week high.

The crude draw was predicated in large part on a steep reduction in imports. Inbound volumes fell to 5.57 million b/d, down 1.83 million b/d on the week and the lowest since the week ended May 15.

Meanwhile, crude exports ticked 160,000 b/d higher to 2.54 million b/d, tipping the net import balance of all petroleum liquids to minus 75,000 b/d – making the US a net exporter for the first time since the week ended May 8.

Refinery utilization climbed to 78.1% of capacity, up 0.6 percentage point from the week prior, however, net crude inputs edged down 40,000 b/d to 14.31 million b/d, snapping eight consecutive weekly increases.

Notably, the decline in net crude inputs was less than the seasonal pull back in refinery demand typically seen in early July, meaning that refinery crude demand actually continued to gain ground on the five-year average. Net inputs were just 15.8% behind the five-year average in the week ended July 10, in from 16.2% the week prior and the smallest deficit since late March.

Products draw as demand inches higher

Gasoline and distillate inventory draws extended last week as refined product demand continued to rebound.

Total US gasoline inventories slipped 3.15 million barrels lower to 248.54 million barrels, and distillate fuel oil stocks edged down 450,000 barrels on the week at 176.81 million barrels.

A second successive weekly gasoline draw narrowed the surplus to the five-year average to 7.3%, in from 10.3% in late June, but distillate stocks remain just off multi-decade highs and are nearly 27% above average.

Total product supplied, a proxy for demand, was the strongest since the week ended March 20 after climbing 360,000 b/d to 8.48 million b/d. The increase was led by a 22% jump in demand for distillates to 3.69 million b/d. Distillate demand was 3.6% stronger than the same period in 2019, the first time demand has been above year-ago levels since the week ended April 3.

Jet fuel demand surged 37% to 1.27 million b/d, the strongest since late March, but still down more than 32% from year-ago levels.

Gasoline demand, in contrast, was down more than 13% on the week at 8.65 million b/d, however, normal post-holiday declines in driving meant that gasoline demand came in just 6% behind year-ago levels, in from 10% the week prior.